JP Morgan AM: Wage gains pose a tricky dilemma for the BoE

JP Morgan AM: Wage gains pose a tricky dilemma for the BoE

May 22, 2023

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Last week's UK jobs report showed regular wages accelerating once again, to 6.7% year on year in the three months to March. Continued wage momentum could provide a tailwind to the UK economy.

Although around 1.4 million households in the UK will feel a significant pinch as they refinance their mortgages this year, wage gains for those whose mortgages are not up for renewal could provide some offset for the economy as a whole. As such, the Bank of England (BoE) is in a tricky position, with it unclear whether it should keep raising rates or wait to see the effect of its prior hikes. Given the strength of wage gains, the BoE might decide to raise rates further and is unlikely to start cutting before a recession hits.

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